Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012

Sales And Use Tax Law

CHAPTER 4. EXEMPTIONS

Article 1. General Exemptions

Section 6368.8

Text of section operative January 1, 2004 through January 1, 2009

6368.8. Sale and leaseback; public transportation equipment. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, qualified equipment, provided all of the following conditions are satisfied:

(1) The qualified equipment is sold or leased by a qualified person.

(2) The qualified person has paid sales tax reimbursement or use tax with respect to the qualified person's purchase or acquisition of the qualified equipment.

(3) The qualified equipment is sold or leased by the qualified person and the qualified equipment is leased back to the qualified person.

(b) For purposes of this section:

(1) "Qualified person" means an entity that qualifies as a claimant, as defined in Section 99203 of the Public Utilities Code, eligible to receive allocations under the Transportation Development Act (commencing with Section 99200 of the Public Utilities Code).

(2) "Qualified equipment" means a vehicle or vessel and any related equipment used in the provision of public transportation services, including, but not limited to, bus and van fleets, ferry boats, rail passenger cars, locomotives, other rail vehicles, train control equipment, fare collection equipment, communication systems, global positioning systems, and other systems and accessories related to the operation of a vehicle or vessel used in the provision of public transportation services.

(c) The exemption provided by this section also applies to subsequent purchases of qualified equipment by a qualified person at the end of the term of a lease or sublease of qualified equipment, provided the provisions of paragraphs (1), (2), and (3) of subdivision (a) are met.

(d) The Legislative Analyst, in consultation with the State Board of Equalization and the Franchise Tax Board, shall conduct a study on the impact of the exemption authorized under this section and shall report to the Legislature, by January 1, 2008, on the following:

(1) The number of persons utilizing the exemption.

(2) The fiscal impact of the exemption, including the total exemption amount and any depreciation claimed for qualified equipment.

(3) The impact, if any, of federal law, including, but not limited to, Revenue Ruling 99–14, on the utilization of the exemption.

(4) The impact of the exemption on California's public transit sector.

(5) A recommendation as to whether the exemption should be continued, and if the continuation of exemption is recommended, recommendations on modifications to the existing exemption provisions that should be implemented.

(6) The impact, if any, on the California personal income and corporation taxes, based on the information provided in subdivisions (e) and (f).

(e) No later than five business days after the closing of any transaction executed pursuant to paragraph (3) of subdivision (a), the qualified person shall provide to the Franchise Tax Board, the Legislative Analyst, the Department of Transportation, the Senate Committee on Revenue and Taxation, and the Assembly Committee on Revenue and Taxation, the following documents:

(1) Copies of the consent letter obtained by the qualified person from the Federal Transit Administration (FTA) within the United States Department of Transportation, authorizing the transaction under FTA Circular 7020.1: Cross-Border Leasing Guidelines.

(2) Copies of the appropriate Internal Revenue Service Form 8264: Application for Registration of a Tax Shelter, that is related to the transaction.

(3) A report describing how the qualified person is using the benefits derived from the lease-leaseback transaction, and, where available, the division between the qualified persons and the purchasers, including equity partners, of the lease or sublease of the qualified equipment.

(f) The Franchise Tax Board, every other year, shall review the information it is provided by qualified persons pursuant to subdivision (e), and, based on the apportionment of income between the qualified persons and the purchasers of the lease or sublease of the qualified equipment, including the equity partners, assess the revenue loss to the state, if there is any. The board shall report its assessment to the Legislative Analyst, the Senate Committee on Revenue and Taxation, and the Assembly Committee on Revenue and Taxation.

(g) This section shall remain in effect only until January 1, 2009, and as of that date is repealed.

History.—Added by Stats. 2001, Ch. 592 (AB 984), in effect October 9, 2001, operative November 1, 2001. Stats. 2003, Ch. 597 (SB 760), in effect September 20, 2003, but operative January 1, 2004, substituted "2008" for "2004" after "January 1," in subdivision (d); substituted "continued, and . . . recommended," for "extended beyond the January 1, 2004 expiration date, and if it is recommended that the exemption should be extended," in paragraph (5) of subdivision (d), and added paragraph (6) to subdivision (d); added subdivisions (e) and (f); and added subdivision letter designation (g) before "This section shall", and substituted "2009" for "2004" in subdivision (g).